WILL POOLE: Well, good morning. It’s 8:10 and probably a lot of you spent the night getting involved in the Bourbon Street version of life immersions last night, so we’ve actually structured my talk this morning to ensure that we can wake you up fast and furious and get you going for the day here.

You’re probably wondering, what is this concept of life immersion about, beyond the Bourbon Street version, what does it mean? Is it a solution? Isn’t an idea? What is it?

And really what we’re here to do is talk about a solution to what I believe is the industry’s biggest problem right now, and that problem is not the bad economy, that problem is not anemic IT spending, it’s not market saturation; it’s none of those things. The problem that we have here is not that the PC is being replaced by other kinds of devices, it’s not that people are not buying PCs as frequently as they were before; the problem we have here is what is the root cause for these issues. And the problem we have a look at is why is it that consumers and business customers of all kinds believe that what they have is good enough? This is the problem we face in the industry is this feeling that I’ve got something that works right now — well, it pretty much works. It’s good enough. Why should I upgrade? Why should I invest my time? Why should I invest a weekend? Why should I invest the risk of my e-mail not working well on the road by buying a new device, buying a new PC, upgrading my home machines?

And that’s a problem that we all face is that we haven’t built technology — and when I say we, I mean all of us, Microsoft being at the center of this — are responsible for not giving consumers, not giving business customers really compelling and engaging reasons to make that investment of their time, of their money to buy new products. We haven’t immersed the technology into their lives as well as we could and we haven’t asked them to immerse their lives into the technology as well as could be done either.

So I think that’s really what this talk here is about is to show you guys our vision of where can we go with this idea of immersive technologies, of life immersions and how can we relate to consumers on a more emotional level so they will just want the new products, so they’ll look at what they’ve got today and say, hey, this isn’t good enough. I see something over here; I want that. I’m willing to sacrifice something else that I can spend money on in order to get that new thing. That’s the thing we have to do is to build those products and technologies that really pull out that emotional reaction in people and give them a reason to engage in a technology, engage in the new product and bring it into their lives in ways they’ve never done before.

All right, so that’s a challenge. Now, to start of what I’d like to do — I told you I’d wake you up so I’m going to ask Steve Willett to come out here and talk to you about gaming. Now, as you know, a hardcore gamers are about as immersed as you can get in PC technologies and, well, you’re about to get immersed too. So, Steve, come on out and let’s see how it works.

STEVE WILLETT: Hi, Will. Thanks a lot. Well, I’m really excited to be here and talk with you about one of the favorite things for me to do on Windows, gaming. As you know, it’s one of the top three activities worldwide for consumers on Windows and I think one of the reasons for that you’ll see here in just a little bit.

Last year alone there were over 764 titles, new titles that shipped on the Windows platform, which is about 35 percent more than shipped on all of the current generation game consoles. In addition to that, for every current generation console that’s in the marketplace in use there’s actually four PCs that are used for gaining. Beyond that, there’s a rich and exciting online community around multiplayer gaining and this morning I actually brought with me Mark Rein, vice president from Epic Games, to give us a little look at what’s happening today in the gaming marketplace and kind of where the future is.

WILL POOLE: Great. It’s so immersive.

STEVE WILLETT: Yeah, let’s take a look, Mark.

So, what you’re really seeing here is Unreal Tournament 2003. This is one of those graphically rich titles that’s shipped on the Windows platform to date. And as you can see, all of the surroundings, everything that you see in this is just super immersive and pulls you right into the experience. As Mark moves through the environment what you should take a look at is just how graphically rich it is and how exciting. You almost feel like you’re actually the character and you’re right inside of the experience.

For a second here, Mark, if you can kind of swing around and show us the character as well, I want to highlight just how realistic the characters are in the game. As he gets up close you can see the level of detail, how real it looks and just how much you as a player can feel like you’re actually in the game and a player.

WILL POOLE: All right.

STEVE WILLETT: And, of course since this is gaming, right, we always have to have a little bit of fun.

So if you think this is exciting, we actually think that things are going to get even better.

WILL POOLE: Well, this has clearly come a long way from 3-D dinosaur adventures 10 years ago but I think it’s got a ways to go.

STEVE WILLETT: Absolutely. What you’re seeing today is certainly people are hungry for more and so what we’ll look at next is really an example of where the technology is headed.

So as you look at this character there are a couple of things I want to highlight for you. One, this is based on the Unreal Tournament 3 engine. It’s a next generation engine. And compared with the title that we were just showing you there are a couple of key differences. This is actually running on DX 9 capable hardware today and this character represents accurately a 1.6-million polygon model compared with approximately a 3,500-polygon model in the game that we just showed you. Again you should draw your eyes to how fluid the motion is, how the shadows track with the character and just how realistic this looks, the floors, the environment, all the surroundings and all the shadows that are happening around the character. So it’s really getting super rich.

WILL POOLE: That is just stunning graphics and clearly these guys are pushing the envelope for where the technology can go.

STEVE WILLETT: Yeah, Epic tells us that they’re really just getting started.

WILL POOLE: Really?

STEVE WILLETT: Yeah. So I think this is a good example of what we can expect to see in games in 18 to 24 months.

WILL POOLE: That’s great. Well, and I think we also can start to apply that technology to other areas on the PC as well.

Right. In addition to the game content and the software we’re starting to see an increase in support for this level of hardware. Typically these games machines have been sold by Falcon Northwest and Alien Ware to a very select audience, but just recently Dell got in the game as well and we’re really excited to see that level of support.

This kind of realistic graphics is not just tied to games. I think there we’re really, really close to pulling it into documents and other graphical representations that happen on your PC. In the “Longhorn” timeframe you’ll see us drive this level of immersion and this level of fidelity right into the base level OS. And from there what we really need is gaming graphics level cards shipping in non-gaming SKUs in the “Longhorn” timeframe.

WILL POOLE: So we’ll start to see our fiscal year ’04 and ’05 budget showing up in a completely immersive experience.

STEVE WILLETT: That’s our hope. I can’t promise you it will be as exciting as games because it’s still work.

WILL POOLE: Okay, good. Thank you very much, Steve.

STEVE WILLETT: Thanks, Will.

WILL POOLE: So I think you all have been exposed to PC gaming for years and you see that it really is working well. This is one of our best sets of customers for the industry. These guys drive new PC sales. They always buy the top end of the market. They buy new machines all the time. They replace them. They want to get the next, the latest and greatest. They’re the trendsetters. They’re driving the investments that we’re making at the high-end of graphics. They’re buying the machines that are loaded with RAM and disk. They really are a great set of customers and a great market for us to continue to go after.

They also, of course, are buying the latest processors and by driving this area, as Mark said, they’re creating an opportunity for us to leverage that immersive experience beyond just gaining and frankly the quality of experience that gamers have been demanding and that the game companies have been supplying has shamed some of us into saying, hey, we’ve just got to go and build that into the operating system. We’ve got to build that into everything we do and make it available so we can deliver that to somebody in whatever environment they’re in beyond gaming. So that’s really the challenge and, in fact, you’ll see some examples of that when you look at some of the combined DirectX and user interface and hardware work that we’re doing in various sessions here that all will fold into “Longhorn.”

Now, let’s think about going back to the economics here. Over the last couple of years we’ve seen a pretty profound shift in the PC industry. And if you look back about 1998 you saw that only about 15 percent of PCs were selling for $1,000 or less. Basically the low-end systems just didn’t sell. And I’m positive the reason for that is there was a huge difference of experience in the low-end systems four years ago versus the high-end systems. People could see the value that they could get. They could feel it. They could live it. They could really appreciate the value of spending the extra 200 or 500 dollars to get the mid-range and higher-end systems.

But there’s been a huge, huge effort of cost -base engineering that has really been very good in terms of driving costs out of the system and taking advantage of the latest technologies and pushing them down to that sub-$1,000 price point, and now we’re seeing that over three-quarters of systems are sold in that price band.

Of course, that means we have margin compression. It also means that we’ve squeezed out the investment opportunity to look into those higher-end experiences, to look into the differentiation.

So you’ve got the problem that somebody goes and looks at an $800 or $800 PC and they say, hey, this meets my needs. It’s good. It’s really good. And they go and look at one that costs more, and they say, well, I don’t see the benefit, I don’t really understand why it is that I should put the extra dollars down there.

And that, in fact, is the challenge for all of us is to say how do we invest in more of what we call experience-based engineering to drive the value, to drive the emotional connection, to drive the immersive opportunities for our customers into the higher price points and higher margin products?

Now, to illustrate this I’ve got three examples up here, which I think really show you where some good experience-based engineering can pay off for the entire industry.

So let’s take the Pocket PC Phone Edition. This came out about six months ago, and, of course, it was a brand new category for Microsoft and for our partners, zero-percent market share, and in the first six months, first seven months here we’re now at 45 percent market share in a segment that is growing 100 percent year over year. Now, that’s a pretty phenomenal success, and that has do with some excellent work in both software and hardware integration and meeting the needs of a customer segment that we understand well and delivering them a product that they can just completely connect with.

Let’s also then look at the Media Center PC. Media Center PC again came out last holiday season. And this is a new category, taking the best of what a PC can do and applying to it a set of audio and video and multimedia experiences that we’re going to look at again later on. And in that short period of time that the Media Center PC has been out we’re seeing the most popular SKUs of Media Center PC actually showing up among the top 10 revenue generators at retail. The top ten revenue generators of over 290 SKUs that are sold at retail and one of the top 10 is the media Center PC. That’s pretty phenomenal for again something that’s less than a year into its life cycle.

And the Tablet PC, again a new category, a huge effort between Microsoft hardware and software partners all working together to bring this new concept to market and we’ve got some of our most popular SKUs they’ve had to go back and increase their production runs by as much as 35 percent month over month in order to meet the demand that they’re seeing for these very popular SKUs.

So that’s where the concept of experience-based engineering can start to pay off for us as were building the products to connect the people in a way that really does show the difference of why they should open up their wallets and spend the extra dollars to buy the new hardware to get the full new experience.

And all of this leads into this concept of really delivering on the vision of life immersion and trying to connect the products to people wherever they are. That means if you’re mobile you’re going to have a great experience. That means if you’re in your living room you have a great experience. If you’re at your office desk, if you’re on an airplane, a train, wherever you are you’re going to have an experience that’s going to let you welcome that technology into your life for business, for personal use and do it in ways that become just completely indispensable to you on a day-to-day basis.

Now, to meet that goal, to actually not only deliver on the vision, to show somebody a product, but to actually deliver that day after day, month after month so that people just love their technology and continue to buy and follow it you’ve got a set of human requirements to meet and these are frankly the hardest things to define, they’re the hardest things to measure and they’re the hardest things to deliver over time.

You have to make people’s lives easier. It can’t be that adopting a new technology is going to add complexity, it’s going to add uncertainty to me. I’ve got to be able to trust it. I’ve got to be able to depend on it.

Now, those are easy things to say but they are darned hard to deliver on a continuous basis. I don’t want to have to think about this technology. I want to be able to just bring it into my life, to my work and have it add value to me every single day.

So there’s a huge set of requirements that we have to meet to deliver on those most fundamental of human issues, the things that are going to let people immerse their lives in the technology and I’m going to talk about those over the next half an hour or so.

So these are the product requirements and they range everywhere from this concept — and these are concepts, by the way, that you’ve heard about from us and from others at past WinHECs, talking about always-on, talking about always-works, talking about just making the form factors irresistible and exciting and delivering on the anytime, anywhere, any device goal.

So let’s drill down a little bit and see what those product requirements are about.

Let’s talk about always-works. Well, this is one, again Microsoft is a big contributor to helping it work and to helping it not work. We’ve done more work in Windows XP and Windows Server 2003 than ever before on software quality. We feel great about how far we’ve come in terms of eliminating software failures, both in our own software and helping our third-party software and hardware vendors make their systems work better.

But the customer really needs to feel confident that the software won’t fail, it won’t let them down, and in the hardware side it can’t be fragile. I’ve got to be able to…I don’t know about drop it on cement, but I’ve got to be able to bump into things, I’ve got to be able to drop my bag, I’ve got to be able to handle the basic wear and tear that’s going to happen to a device that’s with you at all times, and have it come out and keep working.

So that always-works is not an easy thing to do, and here are some of the ways that we are contributing to try to help you and all of our partners together build a system that’s going to always work.

The first one is to look at what are some tools and technologies that we can apply to really understanding how to build the quality into the code in the beginning. The managed code environment obviously is a much more stable and safe way to develop code and you’ve seen a lot of work from us coming out in Visual Studio and all of our .NET efforts in ways that you can build code and applications that are connected and that work and that don’t crash.

Of course, things are still going to crash. There’s code that you can’t build and manage safe. There’s things that you have to build that are going to have interactions that are going to crash. And we’ve got the OCA technologies, and I think Bill or others talked about that in the last couple days, and how we can provide an analysis function to understand what’s happening and go back to our partners and help you understand what’s happening in the marketplace, address those things and move it from being a significant problem for a lot of customers down to a noise level problem that really affects very few people.

We also are looking at ways to build self-healing technologies. That means that when Windows discovers that it has a problem it can fix that problem and the user doesn’t even have to know about it. We need to be able to provide patching and ways to make that healing process easy and fast and transparent. And, of course, we need to continue to drive quality into the process, moving products out through the work we do with signed and verified drivers, through logo-ing programs and so on.

So achieving that concept of always working will be, of course, an evolutionary and continuing process but one that we’re going to continue to support very aggressively as we move towards “Longhorn.”

Building these technologies so that they can be transparent, so they can be easily adopted by customers is again a very challenging goal. Having things work out of the box, we’ve come a long ways over the past 10 years in the industry. We still have a ways to go. And I’m sure that all of you try to be consumers and testers of your own and competitors’ technologies and I can’t tell you how many times over the past year that I’ve bought some technology, taken it home and had it not just work out of the box, installed some software and it doesn’t do what I think it would do, installed a new piece of wireless gear, a new portable device and just had road bumps. And these are not things that people expect; these are real impediments to adoption.

So the scenarios have to be understood and the experience of integrating those technologies to deliver on those scenarios has just got to be transparent and painless.

So we’re doing a bunch of things again to help out here. One of them is looking at how do we set up and install systems so that they can work easily and be resilient to problems. We’ve got the new card consortium where we’re all working together to build the next generation of the PC cards to address small form factors and to increase the performance of those cards as they plug into the system.

We’ve got the UAA effort, Universal Audio Architecture, which means that you can have any kind of an advanced audio device and have it work out of the box in a simplified mode, just like an advanced graphics card can work with a VGA output. We’re going to be able to enable any kind of advanced audio to work simply by turning it on with an installed driver. We’re also working with Intel and their Azalea chipset to make sure that that can support and work within the UAA architecture.

We’ve got a bunch of work in ease of use for connecting devices, the media transport protocols to enable you to plug a portable music player, a cell phone, any kind of a device that’s got media handling capabilities and have that plug in and work with a common drive the same way that cameras can simply plug into Windows XP today using PCP and work very quickly and easily right out of the box.

We’ve got advances in UPnP. I was very pleased to be demonstrating with Canon yesterday in Chicago. Yes, I’m doing back-to-back keynotes; that is a challenge. But just yesterday in Chicago, we showed a new Canon printer making use of the latest in UPnP technologies that you can discover with a laptop in a conference room, wireless connection, to not only find that printer that’s right near you, but also have a two-way rich communication so you might know that it’s out of color ink and you need to switch to a black-and-white printout.

So that kind of ease of use, ease of discovery and rich communications is something that we’re going to continue to invest in.

Of course, these technologies, to be truly immersed in your life, have to always be on. They have to be always up to date and working. That means that I don’t wait a long time for it to boot, whether I may have had a power failure, I may have just been using the thing and turned it off and I want to turn it on again and I want it to be there.

I want the network to always be there. I want to have seamless switching between networks so that when I move from a hotspot to my corporate LAN to a GPRS mobile environment that my network works in all of these areas.

I want that power management to be able to be resilient again to a power failure so I want to have some level of backup, I want to have intelligence in the device itself to ensure that I always get data integrity in that always-on sort of experience.

And, of course, I need to have that all back for this always up-to-date concept by Windows Update. We’ve continued to pour a tremendous amount of investment in ensuring that we can deliver not just security patches but updates to drivers, updates to software to keep people up to date with the current software that delivers what they need.

All right, so those are some of the first challenges and what I’d like to do now is to take a look at this immersive concept as it applies to mobile devices. Cory Linton, could you come out and show us some of this rather cool technology that we have up here in the mobile space? Cory.

CORY LINTON: Hi, Will.

WILL POOLE: Thanks.

CORY LINTON: Thanks. Well, let’s take a look at this immersive mobility. Let’s start over here with XEEL. Now, XEEL is a set of common navigation controls that combine hardware and software to get a consistent navigation experience across any Windows powered device.

And so to show you this I want to give you an example on a SPOT device. So we have here a SPOT device that integrates XEEL, which is this little wheel here with these two buttons, and as you know SPOT allows personal information to be broadcast to a device from anywhere to customize information for me.

So let me just bounce out here to clock. I can scroll through and change clock faces or I can go through and look at news, instant messages, weather. I can go in and see today’s forecast or see today’s forecast or a three-day forecast. Whatever city I’m in, I’m going to see the information for that city.

WILL POOLE: Now, the innovation here though is that we’re taking the concept like a mouse on a PC as sort of a universal way to navigate, and we’re saying, how do we come up with something that’s similar for these extremely mobile devices? That’s what XEEL is about.

CORY LINTON: Exactly. XEEL is about having this common navigation experience on Media Center, remotes, phones, a tablet PC. I can scroll through Outlook using the same kind of UI that I used on a SPOT device. So exactly, it’s having this consistent experience so users don’t have to learn something new every time.

WILL POOLE: So it’s the turn signal and accelerator for mobile computing devices?

CORY LINTON: Exactly.

WILL POOLE: Right.

CORY LINTON: Great. Now, over here we have some ultra mobile PCs that I want to show you. This one is a Sony VAIO U101. This is currently for sale in Japan and this is a very small laptop. It has a 600-megahertz Celeron processor with 256 megabytes of RAM so it’s a full power PC.

And Sony has done a great job of building the navigation above the keyboard so I can hold the PC like this, move the mouse with my right hand and with my left hand click on the buttons right here.

So to show you this, this is build for consumers, and to show an example of the power of this I want to show you Photo Story. So think about when you shares photos with people they typically will open a wallet and they’ll show lots of clips. Well, with the Windows XP Digital Plus! Pack we have a technology called Photo Story that allows me to build a story out of my photos and I’m going to show you one here from somebody that we all recognize. So let me go ahead and launch that.

(Video segment.)

All right, well we’ll stop there. You can download the rest of that Photo Story off of our Web site.

WILL POOLE: Great.

CORY LINTON: But you get the idea that it’s a great way to share photos in a real nice mobile way.

Now, this is a Dolphin prototype PC from Vulcan, Paul Allen’s company, and this one is designed for business users. Again they’ve built navigation, a mouse and buttons above the keyboard, so I can hold it like this and move the mouse around very easily.

You know, again this is a full PC so as a mobile professional I can carry this around with me and have all the power that I have on a laptop but it can fit in my pocket. So I have Outlook open here so I can open this e-mail that I sent you. I can open the PowerPoint. And so imagine I can go to a meeting —

WILL POOLE: And give my talk.

CORY LINTON: Exactly, give your talk out of my pocket here.

WILL POOLE: That’s great. Now, this is a prototype that they have commissioned for licensing. They’re not getting into the PC business, are they?

CORY LINTON: Exactly. Vulcan is not getting into the PC business. This is a design that they’ve created that they want to license to OEMs who would then commercialize it.

WILL POOLE: Got it.

CORY LINTON: So let me come over here. For the ultra mobile experience we have a Tablet PC. So the Tablet PC gives you a full screen and a full PC and an even more mobile experience and its natural UI of being able to be driven with a pen.

So this is a Tablet PC from Motion Computing and I want to show you a line of business applications here that just to give you an idea of the kind of new scenarios that can be enabled with a Tablet PC.

So let’s imagine that I am a leasing agent and you are a potential client of mine. So what I’ve got here is an application that will allow me to show you some property that I’ve got without having to visit that property. So I can come meet you at your office or we can go sit down at a Starbucks and actually look at this property.

WILL POOLE: Or we can be sitting at the Starbucks with a hotspot Wi-Fi connection and you could be pulling this information up off your corporate net?

CORY LINTON: Exactly. I can pull this down in real time, show it to you. And what we have here, we have this 3-D model of this office space here that I can rotate around and move. I can even shave away part of the walls here to give you an idea for what it looks like.

And what’s amazing is this is just a common tablet with common laptop video hardware/software, so there’s nothing special on this. And this comes from a company called NGRAIN that specializes in making complex 3-D models viewable and manipulatable on common laptops and tablets.

And what’s cool is, for example, I can click on the sink here and you can see a picture of the sink. I can even click on these windows and you can see the view out of those windows. So what NGRAIN has allowed is for me to have metadata tied to specific parts of this model.

WILL POOLE: So you’re going to show me which office I might want and you’re going to walk me up to that property and then you’re going to be able to close the deal, right?

CORY LINTON: Exactly. And what I can do is this application is taking advantage of our tablet PC SDK 1.5 and these down here are standard Windows textboxes. And with one line of code they’ve integrated what we call the pen input panel. And what happens when I click on this text box I get this little writing area here and I can go ahead and fill in the company name and pretty good recognition considering I was writing at an angle like that. But with the pen input panel no matter which textbox I click in I get the input panel right there next to the textbox and it’s really only one line of code to turn that on.

Now, I can also tell the pen input panel what kind of data I’m going to be inputting. So, for example, in deposit amount I can put some numbers in here that may be construed as letters but the systems knows that it’s a number so it’s going to bias the recognizer to a number.

So what we can do is we can fill in the information and if you decide you like the property you can go ahead and sign right here.

WILL POOLE: Okay, I’ll rent it.

CORY LINTON: And I’ve got a GPRS connection right here and I can go ahead and submit it. It will send this legally binding form transaction out to our office and the transaction is completed. Today I would go back, fax you a form, you would sign it and fax it back to me. Now we can complete it all on-site in real time.

WILL POOLE: And no time for second thoughts. You closed the deal.

CORY LINTON: Exactly, close the deal and it’s done.

WILL POOLE: Okay. All right, Corey, thank you very much.

CORY LINTON: Thank you, Will.

WILL POOLE: Well, I think you can see the opportunity for immersing those mobile technologies into people’s lives everywhere, whether again you’re looking at a business application or a consumer application. And if we do a great job of that we end up with this concept that they are simply irresistible to purchase and use.

Now, again, this is a list of requirements for irresistibility that you’ve probably heard, seen and actually been engineering towards yourselves for some time. We’ve got to address weight, noise, heat, human interface design. We’ve got to make the fidelity great. We’ve got to make it really perform the way that people expect. And these are all big challenges and we’re going to continue to pound on them but we’re making some great strides we’re seeing in the industry here.

And really what we’re delivering and have an opportunity to continue to deliver is the wow factor and you’re going to see and hear a little bit more of that in the next few minutes.

But that wow factor can be everywhere from great industrial design, so when you see it you just love it, you want it, really delivering to an excellent aesthetic to having the technology deliver the wow through high-performance graphics, through 7.1 sound, through wide screens that really pull you into the experience.

Obviously getting that performance both within a corporate LAN, at a home DSL or broadband-enabled connection, or also working in a wireless environment, these are all things that are key in terms of delivering that wow irresistible performance for the experience.

A final point is this concept of metadata, which you’re going to see a lot of, which is not something that your average user asks for, but is key. As you deal with information you want to explain what that information is, you want to show users information about the information. That means your TV-guide listings. That means your album art for CDs and DVDs. Adding value to their experience through a continuous delivery of metadata is a key way to make the technology irresistible.

Now, the next thing we’ve got to do is to really continue to nail this anywhere, any device concept and that means that no matter where we are not only does it work from a connectivity perspective but it also works from an identity and data integrity and security perspective.

This is quite a challenge if you think about what’s happening with copy protection today, if you think about what’s happening with locked down corporate security, how do we get a Pocket PC to be something that an IT manager is going to trust having the most valuable assets of the company when it could literally be lifted out of somebody’s pocket on a subway.

Well, that means you’ve got to have integrated biometrics in the Pocket PC, as you’re starting to see. It means you’ve got to have the Microsoft DRM technologies to be able to apply, not only to commercial audio and video files, but also to business documents, to the most valuable corporate assets that people have to protect them persistently wherever they go.

And, of course, you also have to have this concept of identity and personalization wired together so that the systems know who you are and what device you’re using so they can deliver you the right information and the right experience no matter where you are.

So migrating that concept of you across all of these devices is necessary to deliver that anytime, anywhere, any device environment.

Now, what I’m going to do now is to show you four examples of how that anytime, anywhere immersion can happen.

The first one, which we’ll demonstrate in a few minutes, is this new technology we have called HighMAT, and HighMAT is for the user that has a PC in their home office, in their office at work, wherever it may be, and they want to take a disk full of rich media and take it into their living room. They may not have networking connectivity in their home. They might want to take this for a portable laptop experience on an airplane or in the living room, wherever it might be. And the advantage of HighMAT is that it’s going to give them the ability to have a very rich experience of that media copied onto a CD that they can take with them to these different devices.

The second one is now let’s add some more value with the content delivery services. We’ve just announced this today and this provides a means for devices of all kinds, consumer electronic devices, PCs, whatever they may be, around a home to discover content using UPnP services to discover content that’s stored on a home server, and to access that content and display it and render it locally. So it’s all about finding a wealth of content and bringing it to the place where the user wants to consume it.

Now, a third way is to go a step further, and this is to say, have a device that doesn’t find content and render itself, but a device that actually takes the entire user experience from a home computing device like a Media Center and renders that on a local screen. And it’s a big difference there, in terms of what can be delivered, some audio and video content in the first example, a complete immersive experience in the second.

And the final thing, of course, the concept of total immersion here and we’re going to walk you into that in about five minutes is let’s just go and put together absolutely the best technology that can be delivered to the home. Let’s get 5.1 Surround Sound, high-definition video, and let’s let the consumer be total immersed in the future of entertainment right now using the latest PC technologies.

So to demonstrate some of this I’d like to ask Keith Laepple to come up and show us some of these really cool new technologies. Keith.

KEITH LAEPPLE: Thanks, Will.

Let’s get started with a quick look at HighMAT.

WILL POOLE: All right.

KEITH LAEPPLE: Microsoft is really excited about its partnership with Panasonic on the HighMAT specifications because it represents the collaboration between the PC industry and the consumer electronics industry to address some key issues, key consumer issues with the playback of PC content through consumer electronic devices.

Now, that experience begins over at the PC when we want to create a disk with personal content, things like digital photographs, personally edited videos from the PC, and legitimately acquired audio and video content that we’d like to burn to a CD so that we can play it back on portable devices, in a car player or in devices elsewhere in our home.

So what you see on the screen is the CD writing wizard of Windows XP and what we’ve done is we’ve had some audio and some photo images queued up and ready to be written to this CD in the wizard.

But this is an enhanced version of the wizard that Microsoft is announcing today, which includes support to burn the CD in a HighMAT format. And basically what that means is that in addition to burning these files to the CD, we also write out some additional HighMAT metadata to the disk that will allow HighMAT compatible players to instead of just show the filenames in presenting the content, but actually present a more immersive, easier to use and higher performance user interface when it’s playing the disk.

WILL POOLE: So you’re going to show some of that metadata I was talking about a minute ago, but you’re also going to do this in a way that’s completely compatible, so HighMAT disks have a superset of information of a standard CD-ROM.

KEITH LAEPPLE: That’s absolutely right. The superset and the disk that we will create here will play on non-HighMAT as well as HighMAT disk players.

WILL POOLE: You just get a better experience.

KEITH LAEPPLE: You get a better experience on the HighMAT player like the one we have here.

What we have here on stage is a Panasonic DVD player, standard DVD video player that includes for HighMAT audio and image disk playback. This is one of seven devices that are being announced that Panasonic will ship this month with support for HighMAT audio and video and includes standalone DVD players like this one, includes portable DVD players and some other home theatre equipment as well.

So what we did was earlier we actually burned the CD using the wizard that you just saw and we’ve loaded it into this DVD player and what happened was the DVD player detected the HighMAT data and it started up in what you see on the screen, which is the HighMAT view, the startup menu of the content that’s on the disk.

WILL POOLE: Now, the view looks somewhat familiar if you’re a Windows XP user but, in fact, you’ve got that really rich experience on a consumer electronics device.

KEITH LAEPPLE: Yeah, you have a nice background there. You have the name of the disk as we created it, Keith’s travels, and what has actually happened is all the content instead of being one list has actually been automatically sorted into the two folders, the audio folder and the picture folder. So I can go ahead and navigate into the picture folder and a nice feature of this HighMAT DVD player from Panasonic is that in addition to playing DVD video movies and playing audio disks it actually lets you view photos, slideshows of photos that are burned to the CD. So what I’m doing here is navigating through some of my images I burned to the CD of some vacations, including a summit climb I made of Mount. Rainier back in 2000.

WILL POOLE: And for those of us that have adopted digital photography, you probably know that the significant others in our family all find that the photos have kind of dried up because they’re all on the PC and they’re in your home office but they’re not coming into the living room or in the place where people can consume them. This gives them a great solution to take all those great works you’re doing in digital photography and experience it in your living room.

KEITH LAEPPLE: Absolutely. Yeah, that’s why we’re excited about HighMAT. It provides one way to create that more immersive and get more value out of your digital media.

Now, we’re actually making three HighMAT related announcements today and the first is about the enhanced version of the Windows XP CD writing wizard that you saw a minute ago.

The second announcement is that with our partner Panasonic later this year we will be releasing extended versions of the HighMAT specifications to cover DVD recordable media in addition to CD recordable.

And the third announcement is that two additional software vendors, Creative and Roxio, have announced that they will be including support for HighMAT playback and disk creation in their software applications.

WILL POOLE: That’s great.

KEITH LAEPPLE: So a lot of activity there.

So we just saw HighMAT as an example of bridging the PC and consumer electronics experiences for more immersive experiences and entertainment.

WILL POOLE: For photos, for music.

KEITH LAEPPLE: For photos, for music, core PC digital media.

WILL POOLE: Great.

KEITH LAEPPLE: Now, another way we can create those experiences and bridge the PC and CE world is through the home network. So as you talked about in your slides, we have something called the Media Center TV Client, so we’ll move across the stage here and take a look at that.

Now, after the successful introduction of Windows XP Professional Media Center Edition last fall, one of the top requests we’ve heard from consumer end users, from retailers, from OEMs is the ability to have the immersive rich Windows Media Center experience, not just at the PC but at any TV or any display in the home, and to be able to do that without having to go out and buy a Media Center TV for every TV in the home.

So what we’re very happy to be doing today and this week at WinHEC is previewing some of the technologies and solutions we’re developing in house to actually solve that problem.

And what that includes is here on stage we have a standard definition TV, just off-the-shelf like you might purchase and have in any room of your home to watch TV but here on top of that we have a hardware reference design, an off-the-shelf reference design that we’re using for the development of the Media Center client software.

Now, there are actually three key hardware elements to this device. The first is a system-on chip solution by ATI Zillion, which has advanced graphics and video processing. It has an Ethernet connection so this device can connect into the home network and find and use Media Center PCs throughout the home. And it has an infrared solution so we can use a remote control to control the experience.

Now, the software running on this device is based on Windows CE .NET 4.2 and we’re going to take a look at what this combination of hardware and software enables.

WILL POOLE: Great.

KEITH LAEPPLE: So we start the Media Center on a Media Center client device, the same way we would over on a Media Center PC. We use the Media Center remote control and we press the green start button. And what that causes this Media Center client device to do is to go out on the home network, find the Media Center PC, establish a secure logon so create a secure logon session and begin a Media Center session running in the background, invisibly on the Media Center PC.

And the one we’re using for this demonstration is right there on stage. It’s down on our home theatre set but it’s connected only through a network connection over here to this device.

WILL POOLE: And to be clear, from the four examples I gave earlier, this is really the third, right, where we’re actually taking the entire experience from the Media Center PC, not just the content but the entire experience and delivering that to this inexpensive set-top device.

KEITH LAEPPLE: And that’s exactly what you see on screen. What we’re viewing here on the TV through this device is the same Media Center session we would have on the Media Center PC locally, access to the full picture collection, the music collection, the personal video, just as we would have it and are stored on the PC.

But what’s really great about this solution is that we just upgraded the TV experience that’s possible on this TV dramatically by using the Media Center PC’s TV capabilities. That includes an electronic program guide, it includes TVR capabilities, the ability to watch TV shows that we’ve digitally recorded and stored on the Media Center PC hard drive, and it includes all the enhanced information that we see from the guide as we’re able to click through and change the channel. It also includes basic key functionality like live pause, a feature we absolutely didn’t have when we were just watching live TV. We get all that advanced TV functionality delivered to us at this TV.

WILL POOLE: So I buy a Media Center PC, I buy an inexpensive piece of hardware about a year from now and I’ve now got my 10-year old TV in my bedroom that has the latest and greatest of all technologies available.

KEITH LAEPPLE: You got it. Truly bringing more immersive experiences with the consumer electronics and the TVs you already own, absolutely.

So for our next view of immersive entertainment we need to step into our home theater. So I’m going to ask you to drive this.

WILL POOLE: Can I drive this time? Yeah, all right.

KEITH LAEPPLE: Absolutely, since I did that one.

So what we’re about to see is what’s possible for consumers who want to have total immersion, the ultimate digital home theatre experience that’s made possible by the combination of the Media Center PC with high-end, high-definition plasma displays like this one and digital surround audio systems.

And the way we’re going to do that is we’re going to play some digital surround audio encoded in Windows Media 9 Series and we’re going to play back some high-definition video. We’re going to do that from the Media Center.

WILL POOLE: Let’s get immersed.

KEITH LAEPPLE: Let’s get immersed.

WILL POOLE: Press the green button.

KEITH LAEPPLE: Start her up. Press the green button.

WILL POOLE: Here we go.

KEITH LAEPPLE: Okay, let’s start with music. So, Will, if you will, take us over to the My Music page. And in My Music you’ll see we have some 5.1 samples. These are music files that have been encoded into six channel digital surround in Windows Media 9 WMA Pro.

WILL POOLE: Now, we’re in New Orleans. Maybe we should listen to New Orleans?

KEITH LAEPPLE: Sounds good to me.

WILL POOLE: Yeah, let’s give it a shot. OK, are you all ready for an immersive audio experience? Here we go.

(Audio segment.)

KEITH LAEPPLE: Pretty immersive audio, right?

WILL POOLE: Absolutely.

KEITH LAEPPLE: Made possible by the advanced compression of Windows Media Audio Pro and Windows Media 9 Series.

And what’s really cool about this is this makes this type of audio experience and this type of content available that can stream through the Web for music services and can even be distributed throughout a home network vis–vis the advanced compression of that multi-channel sound.

So that was audio. Let’s move on and let’s take a look at total immersion in high-definition digital video. So take us over to My Videos. What you’ll see we have loaded is a scene from “T2 Extreme.” It’s an upcoming release of the “T2 Extreme” DVD from Artisan Home Entertainment. It’s encoded in Windows Media 9 high-definition video.

WILL POOLE: Now, this is a bit of a first here, right? This is the first time we’ve had a DVD release of a true high-definition bit of content, right?

KEITH LAEPPLE: That’s right. On June 3rd, the “T2 Extreme” DVD will be released from Artisan Home Entertainment, and it’s actually going to include a two-disk set. The first disk is a standard definition version of the full feature length “T2 Extreme” film, but Disk Two is going to be a high-definition DVD ROM with the full length film also stored on that one DVD in Windows Media 9, and that’s delivered at a resolution that’s about three and a half times that of the standard definition DVD.

WILL POOLE: So advanced PC users get a taste of the future of consumer electronics on a PC long before they’ll actually get that on any kind of a high-definition DVD player and we’re able to do that with renewable security and incredible compression technologies at a quality level that just blows people away.

KEITH LAEPPLE: On PCs and displays that are available today.

WILL POOLE: Let’s take a look.

(Video segment.)

KEITH LAEPPLE: There we go, total immersion in digital high-definition video in the digital home theatre.

So before we end we want to invite everyone to see this demo and all the other immersive entertainment demos close up in the Windows AV Technology Showcase. It’s over in the WinHEC trade show floor and we’ve got development team members from all these groups there to give you a close up view of the demos and answer your questions.

Another reason to head over there is to go pick up a free copy of the “Standing in the Shadows of Motown” DVD that’s recently released. Like the upcoming “T2” release this is a two-disk set and the second disk is a high-resolution version of the film in Windows Media 9. It’s a great movie. It’s a great experience of Windows Media 9 player on the PC.

WILL POOLE: It’s got a fabulous soundtrack and really you can watch it on your DVD player. You can also watch it even better on your PC.

KEITH LAEPPLE: And it’s free.

WILL POOLE: All right.

KEITH LAEPPLE: All right. Thank you.

WILL POOLE: Thank you. (Applause.)

Well, so I’m sure you’re all wondering, when does all this stuff come to the market and how does it fit into our roadmap? And again I think you’ve also seen that some of this actually happening today. You’ve seen a bunch of technologies that are out that are succeeding that are driving revenues up, that are engaging consumers in really great new ways but we’ve got a lot more work to do. And as everybody knows, Longhorn is the big goal for us from an operating system perspective that we are putting all of our effort behind. This is a huge, big, bet-the-company move, and it’s one that we are very enthusiastic about what we’re able to do here. The breakthrough work that we’re going to do in “Longhorn” is going to really change the landscape of what consumers, what businesspeople see when they look at a new PC.

So the road between now and “Longhorn” is not super short. We’ve got some work to do. It’s going to take us a while to get there. And what you’ll see is there are a couple of major milestones, a couple big road signs there.

We went through in March the developer preview. We got some great feedback to understand what people want to see from a pure development perspective in the “Longhorn” platform.

And the next major milestone from a developer perspective will be in October of this year with our Professional Developers Conference. So I urge you all to make sure that the right people from your companies are attending the PDC and getting fully wired into the program as we begin the path to getting the product completed, which will really be kicked off in depth at the PDC in October.

Over the course of 2004 you’ll see a couple of releases in the betas for “Longhorn” and we’ll see that coming to market in 2005.

Now, I’m sure that many of you have heard about or wonder about the possibility of whether we’re going to do something before “Longhorn,” is there an interim release, and that’s something that I don’t expect us to do. Currently we have some additional releases that are coming out as follow-ons to the XP Media Center Edition and the Tablet PC Edition so we’ve got some great advances and fit and finish and addressing additional international marketplaces with new handwriting recognition, new guide data for Europe for the Media Center and so on.

So you’ll see some good incremental moves there but really the weight of the company, the weight of all the people in the Windows client division and across the platform’s division, the weight of that effort that we’re doing is around “Longhorn” and that’s what we’re focused on and we hope to get you all really pulling the same way so we can come out with a huge wave of excitement for the industry when “Longhorn” ships in 2005.

So really our collective mission then, to deliver on this concept of total life immersion, is to embrace the human factors like we’ve never done before, to really understand how to make that emotional connection to our customers to address all of the product requirements that I talked about, making it just work, making it something that you can invite and live with every day in new and profound ways from a technological perspective both at the hardware and with the software to deliver that immersive experience.

That’s what we’re all about and we’re real excited to be partnered with you on it and look forward to your engagement in the sessions today and tomorrow getting your feedback and getting us all on that path to building a great immersive experience for “Longhorn” PCs in 2004 and 2005.

So thank you very much.

(Applause.)